FINAL RESULTS PRESENTATION for the year ended 31 March Presented by Arnold Goldstone (Chief Executive Officer)

Transcription

1 FINAL RESULTS PRESENTATION for the year ended 31 March 2018 Presented by Arnold Goldstone (Chief Executive Officer)

2 Agenda 01 First things first 02 Results at a glance 03 Divisional review Capital Equipment Group (CEG) Engineering Solutions Group (ESG) 04Group financial overview 05 Prospects and strategy 06 Appendix 2

3 First things first 3

4 First things first 1. Specific Taxation Provision Stakeholder and market commentary over the potential tax consequences of certain transactions which Invicta entered into several years ago Based on advice received, the board is of the view that the transactions are tax compliant However, ongoing uncertainty is affecting the Group and hampering its ability to use equity to fund expansion Pragmatic solution, which provides certainty, is preferable to potentially protracted and costly litigation (significant management time and material opportunity cost for the Group) The company therefore continues to negotiate with SARS with a view to reaching agreement regarding the tax consequences of these transactions Taking all the above considerations into account, the board has concluded that an amount of R400 million is the best estimate of an additional provision for taxation, which has been raised in the AFS for FY 2018 Should agreement not be reached with SARS and, if SARS elects to issue revised assessments, the Group will defend its position fully 4

5 First things first (continued) 2. Effect of Steinhoff collapse on Invicta In wake of the collapse of Steinhoff International s share price in Dec 2017, Invicta undertook a full review and considered all possible contagion risks No direct links to Steinhoff Common major shareholder (Wiese family) BSG sold to Steinhoff Africa Retail Ltd in Sep All proceeds were received in full on the due date No direct fallout on Invicta No sale of shares by Wiese family Business as usual 5

6 First things first (continued) 3. Involuntary sale of shares by CEO Recent SENS announcement regarding the involuntary sale of shares by an associate company of the CEO Shares were owned by an associate company of the CEO, owned by a trust of which the director is a beneficiary but not a trustee Shares were pledged to the bank as security for a loan to associate 7 years ago Margin call (as a result of decline in IVT share price) which the borrower could not meet Some of the shares which had been pledged to the bank were sold by the bank Total of shares were sold which equates to < 7% of CEO s holdings JSE waiver obtained 6

7 The year in perspective 7

8 Results at a glance Revenue 0% to R9.6 billion Operating profit before foreign exchange movements -11% to R940 million Headline earnings per share before specific tax provision -23% to 464 cents Headline earnings per share after specific tax provision -81% to 90 cents 8

9 Results at a glance (continued) Profit before tax -15% to R760 million NAV per share 0% cents TNAV PER SHARE 2.0% to CENTS 9

10 The year in perspective Tough markets, satisfactory results The markets in which Invicta operates: o Mining : Weak in South Africa but improving in rest of world o Agriculture: Severe drought in Western Cape, low maize prices, land expropriation uncertainty o Industrial & manufacturing: Deterioration in activity in South Africa o South East Asia: trading conditions improving Credit ratings downgrade in SA in Apr Q2018: GDP -2.2%. Worst Quarter since 1Q2009 agriculture -24.2% mining -9.9% and manufacturing -6.4% 10

11 The year in perspective (continued) Sale of BSG Sep 2017 SARS negotiations Loss of New Holland Agricultural machinery agency May 2017 Volatile ZAR, political uncertainty until Dec 2017 Reduced staff by 265 (7%) in SA Bottom of cycle? Better outlook 11

12 The year in perspective Exchange rate volatility 1 Apr 2017 (13.42) 15 June 2018 (13.39) 31 Mar 2018 (11.82) 12

13 Divisional review 13

14 Divisional structure Capital Equipment Group CEG Importer & distributor of agricultural equipment, construction equipment, forklifts and aftermarket replacement spare parts Engineering Solutions Group ESG Leading distributor of engineering consumables products, technical services and provider of engineering solutions Northmec New Holland* CSE Doosan HPE Criterion Shamrock Handling Concepts ESP Landboupart Kian Ann Group (Singapore) BMG o o o Hansen OST Screen Doctor Man-Dirk Group o o SA Tool Sibuyile Autobax Hyflo Group *Equipment sales discontinued May 2017 Aftermarket support continues (spare parts). 14

15 Revenue contribution by operating segment (excluding Head Office) R million 12,000 10,000 9,077 8,816 8,783 9,620 9,633 8,000 6,000 3,955 4,209 4,299 4,665 4,559 4,000 2,000 5,122 4,607 4,484 4,955 5,074 0 MAR 2014 MAR 2015 MAR 2016 MAR 2017 MAR 2018 Engineering Solutions Group 47% (48%) 53% (52%) Capital Equipment Group 2018 (2017) 15

16 Operating profit contribution by operating segment after forex costs (excluding Head Office) R million 1,200 1, MAR 2014 MAR 2015 MAR 2016 MAR 2017 MAR 2018 Engineering Solutions Group 53% 47% (53%) (47%) Capital Equipment Group 2018 (2017) 16

17 Revenue contribution by region (continuing operations only) Asia 11% (10%) 5% (6%) Africa Other 5% (4%) 79% (81%) South Africa** 2018 (2017) **Target: 50% by

18 Revenue contribution by sector (continuing operations only) Mining 16% (14%) 14% (16%) Construction Manufacturing & Industry (5%) 12% (11%) 30% (30%) Agriculture & Forestry General Trading 28% (29%) (63%) 2018 (2017) 18

19 Return on Net Operating Assets (RONA) (based on average net operating assets) 30% 25% 20% 15% 10% 5% 0% 17.5% 21.8% 19.4% 17.6% 20.6% 24.1% 27.3% 22.5% 19.2% 22.0% FY 2016 FY 2017 FY 2018 * 9.0% 18.5% CEG ESG Discont. Ops IVT Group *Discontinued operations represents the Building Supplies Group which has been disposed of during the current year as well as the MacNeil Plastics business which remains as a discontinued operation. 19

20 DIVISIONAL REVIEW Capital Equipment Group

21 Review of 2018 Revenue 2.4% Operating profit before foreign exchange movements 3.8% Difficult trading conditions overcome by increased market share, better sales mix Activity in mining in general is saving construction unit sales Reduced level of investment in infrastructure by both private and public sectors Increase in demand in the South East Asia markets Strength of the South African Rand against the US Dollar contributing to more competitive prices lower margins Good rains resulted in a record crop of 16.7m tons of maize however the maize price dropped by 37% on yellow and 52% on white to below R2000 a ton, affecting farmers liquidity. Operating margin decreases from 9.5% in 2017 to 8.9% in

22 Review of 2018 Chief Executive Officer Tony Sinclair Managing Director Loy Soo Chew Northmec NHSA CSE Doosan HPE Africa ESP Criterion Shamrock Managing Director Managing Director Managing Director Managing Director Managing Director Managing Director Managing Director Managing Director Johan van der Merwe Tony Sinclair Ross Collard Darrel Holton Alex Ackron Andrew Grobler Brenton Kemp Marius Schutte 22

23 6,000 5,000 4,000 3,000 2,000 1,000 0 Revenue (R m) Final results summary 31 March , ,955 4, ,199 2,575 2, ,285 2,380 2, MAR 2016 MAR 2017 MAR Operating profit before foreign exchange movements (R m) MAR 2016 MAR 2017 MAR ,500 2,250 2,000 1,750 1,500 1,250 1,000 Net operating assets (R m) 2,255 2,306 2,410 MAR 2016 MAR 2017 MAR 2018 Operating profit margin (R m) 9.5% 8.1% 8.9% 9.7% 8.2% 9.3% 7.9% 9.2% 8.5% MAR 2016 MAR 2017 MAR 2018 First Half Second Half 23

24 Market volumes Agriculture equipment volumes FY 2018 o Tractors 14% o Combines 2% o Sprayers 4% Construction equipment volumes o Segments serviced by Invicta 15% 24

25 CEG s volume increases Agriculture equipment volumes FY 2018 o Tractors 40% Construction & Forklift equipment volumes o Case 37% o Hyundai 46% o Forklift 15% 25

26 Yellow/White Maize prices/zar Maize Safex Prices May 2013 to April ,500 5,000 4,500 4,000 Price in ZAR 3,500 3,000 2,500 2,000 1,500 Yellow Maize White Maize 1,000 8-May Jun Jul Aug Sep Oct Nov Dec-13 3-Feb-14 7-Mar Apr May Jun Jul Aug Sep Oct-14 2-Dec-14 6-Jan-15 9-Feb Mar Apr May Jun Jul-15 1-Sep-15 5-Oct-15 6-Nov Dec Jan Feb-16 1-Apr-16 5-May-16 8-Jun Jul Aug Sep Oct Nov Dec Jan Mar Apr May Jun Jul Aug Sep Oct Nov-17 2-Jan Feb Mar Apr-18 26

27 Sales analysis 31 March 2018 Manufacturing & Industry 4% Construction 45% 51% Agriculture & Forestry

28 Tractor & Sprayers Market Share 31 December % Tractors 45% Sprayers 12.0% 11.8% 40% 39% 10.0% 8.0% 7.5% 6.7% 8.1% 6.6% 8.4% 6.7% 9.1% 35% 30% 25% 21% 22% 32.4% 6.0% 4.0% 5.5% 20% 15% 14% 20% 16% 19% 10% 9% 2.0% 5% 0.0% %

29 DIVISIONAL REVIEW Engineering Solutions Group

30 Review of 2018 Revenue 2% Operating profit before foreign exchange movements 0% Satisfactory results considering the volatile year BMG World Site Reveal complete Wildcat strike Dec 2017 hurt operations Focussed on tight cost management Simplify for Success remained a high priority One acquisition Fenner Belting (Sales & Marketing) February 2018 Since Y/E: Forge Industrial Group (Toolquip & Allied, F&H Machine Tools, Belt Brokers) some conditions outstanding Trading conditions: o Mining: o Agriculture: o Heavy industry: Continued closing / downscaling of operations Major project work remained stagnant Spend recovery slow as rains returned, but Western Cape still heavily affected by drought This continued to be a challenging market 30

31 Management structure Chief Executive Officer Gavin Pelser BMG (Bearing Man Group) Man-Dirk Group Autobax Hyflo Managing Director Gavin Pelser Managing Director Gavin Hall Managing Director John Black Managing Director Emil Berning 31

32 6,000 5,000 4,000 3,000 2,000 1,000 0 Revenue (R m) 4,299 2,214 Final results summary 31 March ,665 4, ,319 2, ,085 2,346 2,270 MAR 2016 MAR 2017 MAR Operating profit before foreign exchange movements (R m) MAR 2016 MAR 2017 MAR ,400 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 Net operating assets (R m) 2,321 1,936 2,039 MAR 2016 MAR 2017 MAR 2018 Operating profit margin (R m) 10.3% 10.5% 9.4% 9.6% 10.3% 12.1% 9.3% 10.3% 8.9% MAR 2016 MAR 2017 MAR 2018 First Half Second Half 32

33 Review of 2018 Divisional performances: o o o o BMG: met expectations Autobax: excellent performance ManDirk: met expectations Hyflo: disappointing results; project work lumpy, muted; business restructured African operations: o Good performance of African branches (weakened local currencies) o Establishment of BMG Ghana Trading commenced in February 2018 Working capital: o o Increased stock as a result of the Fenner acquisition and strategic increase of certain stock subject to new import duties (fasteners) and increased lead times due to world demand Debtors book well managed; Debtors >R250,000 insured 33

34 Revenue analysis 31 March % (35%) 10.7% (11.4%) 0.9% (0.6%) 66% (65%) 88.4% (88%) Consumables Engineering 2018 (2017) South Africa Africa Other Strategy of market differentiation by: o complementing product distribution with technical expertise African revenue declined marginally as a % of ESG revenues mainly as a result of strengthening of the Rand The Fenner acquisition has mainly SA-based revenues 34

35 Sales by industry sector 31 March % Parastatals (1%) Construction 3% Oil & Gas (1%) Food & Beverage Agriculture Projects / Consultants 6% 4% (5%) 6% (4%) (6%) 4% (4%) 28% (24%) Mining Automotive & Transport 7% (7%) Cash Sales 8% (8%) 14% (20%) 18% (20%) Industry Well diversified Other 2018 (2017) 35

36 Highlights for 2017/2018 BMG World site reveal September ,700 visitors over 3 days BMG Be Part staff engagement initiative 36

37 Highlights for 2017/2018 (cont.) Acquisition Fenner Belting 37

38 DURBAN Highlights for 2017/2018 (cont.) Regional Service Centres PORT ELIZABETH CAPE TOWN 38

39 Group financial overview 39

40 Revenue ,465 10, ,632 9,640 8, ,336 5,190 4,410 4,905 4, ,129 5,270 4,389 4,727 4,857 0 MAR 2014 MAR 2015 MAR 2016 MAR 2017 MAR 2018 *Restated First Half Continuing Second Half Continuing 40

41 Operating profit 1,200 Operating profit before foreign exchange movements (R m) Operating margin (%) 1, , , , %** 10.3% 9.0%** 10.0% 8.5%** 8.4% 10.9% 12.5% 9.8% 10.7% % 8.1% 8.6% 9.3% 8.8% 0 MAR 2014 MAR 2015 MAR 2016 MAR 2017 MAR 2018 MAR 2014 MAR 2015 MAR 2016 MAR 2017 MAR 2018 **Excluding once-off items Once-off Second Half Continuing First Half Continuing First Half Second Half 41

42 Attributable earnings (R m) R million MAR 2014 MAR 2015 MAR 2016 MAR 2017 MAR 2018 Ordinary s/h Minority s/h Pref s/h Once-off Tax Provision 42

43 Earnings per share 1, m weighted average nr of ordinary shares Rights issue Cents m weighted average nr of ordinary shares MAR 2014 MAR 2015 MAR 2016 MAR 2017 MAR 2018 *Restated First Half Second Half Once-off EPS after specific tax prov

44 Headline earnings 31 March March 2017 R million Audited % Change Attributable Earnings 126, ,304 (76) Adjustments Headline EPS adjustments on discontinued operations (578) Impairment of intangible assets Gain from bargain purchase price recognised (235) Impairment of PPE 3,517 (Profit)/Loss on disposal of investments (24,440) 5,286 Profit on disposal of other assets (326) (231) Net profit on disposal of PPE (13,335) (11,355) Impairment of goodwill 4,767 3,089 Total adjustments before taxation and NCI (33,334) (507) Taxation 11,532 1,456 NCI 307 Total adjustments (21,802) 1,256 Headline Earnings 104, ,560 (80) 44

45 Dividend per share Cents per share Feb 2015: Special dividend of cps was paid % Interim Final Salient dates for the 2018 Final Dividend Last day to trade to be eligible for the dividend Tuesday 24 July 2018 Shares commence trading ex the dividend Wednesday 25 July 2018 Record date in respect of dividend Friday 27 July 2018 Dividend payments Monday 30 July

46 Cash flow movement ,000 1,800 1,600 1,013 (585) * Capex of R285m less proceeds on sale of PPE R51m ** Acquisitions of R99m less disposals of R50,3m R million 1,400 1,200 1, (136) (264) (163) (234)* 404** 135 (19) (11)

47 Prospects and strategy 47

48 Prospects Current trading conditions: ESG improving CEG no meaningful improvement yet South East Asia continued growth Benefits of relocations, restructurings and expansions beginning to bear fruits e-commerce Big focus on margin improvement and cost control working capital improvement cash generation SARS settlement negotiations ongoing. Outcome will determine availability of cash resources Local and international investments, good opportunities in SA Secondary listing to expand the Group s international footprint in a measured and focused approach (table being prepared to list offshore, only when right offshore acquisition opportunity presents itself) 48

49 Strategy Invicta s strategy is to: Generate healthy cash from existing businesses Build on the strength of the current businesses Focus on customer service, value-added distribution and supply chain efficiencies Diversify the Group s revenue stream geographically Acquire businesses that are a strategic fit for the Group Maintain RONA >20% for each of the underlying businesses Target real, sustainable growth 49

50 Q & A Thank you for your attendance and participation For any further Investor Relations questions please contact: Arnold Goldstone (CEO) arnoldg@invictaholdings.co.za Craig Barnard (CFO) craigb@invictaholdings.co.za Marlize Keyter (Keyter Rech Investor Solutions) mkeyter@kris.co.za

51 Appendix 51

52 Statement of Profit or Loss and other Comprehensive Income 31 March March 2017 R'million Audited % Change Continuing operations Revenue 9,640 9,632 0 Operating profit before foreign exchange movements 940 1,051 (11) Net foreign exchange cost (71) (41) 75 Operating profit 869 1,010 (14) Interest paid (947) (889) 6 Dividends received from financial investments Share of profits of associates 14 4 Interest received Profit before taxation from continuing operations (15) Income tax expense (536) (322) (67) Profit for the year from continuing operations (61) Discontinued operations Profit for the year from discontinued operations 8 37 (79) Profit for the year (62) 52

53 Statement of Profit or Loss and other Comprehensive Income 31 March March 2017 R'million Audited % Change Profit attributable to: Owners of the company (76) Non-controlling interest 21 (3) Preference shareholders (62) Earnings per share from continuing operations (cents) (76) Earnings per share (cents) (76) Headline EPS from continuing operations (cents) (81) Headline EPS and diluted HEPS (cents) (80) Weighted average shares in issue ( 000) 106, ,

54 Statement of Financial Position 31 March March 2017 R'million Audited % Change ASSETS Non-current assets Property, plant and equipment 1,721 1,641 5 Financial investments - 1,982 (100) Goodwill Other intangible assets (9) Financial assets - 64 (100) Finance lease receivables Long-term receivables 4 3,374 (100) Investment in associates Deferred taxation Non-current assets 2,929 8,167 (64) 54

55 Statement of Financial Position 31 March March 2017 R'million Audited % Change Current assets 7,386 8,098 (9) Inventories 3,918 3,663 7 Trade and other receivables 1,620 1,542 5 Current portion of finance lease receivables Current portion of financial investments (17) Current portion of long-term receivables 11 2 Taxation prepaid Bank and cash balances 1,017 1,052 (3) 7,228 7,025 3 Assets classified as held for sale 158 1,073 (85) TOTAL ASSETS 10,315 16,265 (37) 55

56 Statement of Financial Position 31 March March 2017 R'million Audited % Change EQUITY Equity attributable to the equity holders 4,990 5,116 (3) Non-controlling interest (35) SHAREHOLDERS' EQUITY 5,090 5,268 (3) Shares in issue ( 000) 108, ,495 - Net asset value per share (cents) 4,691 4,715 - Tangible net asset value per share (cents) ,000 (2) 56

57 Statement of Financial Position 31 March March 2017 R'million Audited % Change Non-current liabilities Long-term borrowings 1,647 6,793 (76) Financial liabilities - 64 (100) Deferred taxation Non-current liabilities 1,685 6,892 (76) 57

58 Statement of Financial Position 31 March March 2017 R'million Audited % Change Current liabilities 3,540 4,105 (14) Trade and other payables 1,685 1,939 (13) Provisions (10) Share appreciation rights liability 1 6 (83) Taxation liabilities Shareholders for dividends (2) Current portion of long-term borrowings (13) Bank overdrafts (18) 3,422 3,433 (0) Liabilities associated with assets held for sale (82) TOTAL LIABILITIES 5,225 10,997 (53) TOTAL EQUITY AND LIABILITIES 10,315 16,265 (37) 58

59 Group structure BBEE & Staff Trusts Invicta Holdings SA Non - SA 25% 75% 100% 100% 100% 100% Invicta SA ESG Invicta Properties CEG Invicta Treasury Invicta Finance Invicta African Holdings Invicta Offshore Holdings 100% 100% 100% 100% Invicta Asian Holdings BMG Man-Dirk Autobax OST SA Tool Hansen Hyflo Sibuyile Northmec New Holland* CSE Doosan HPE ESP Criterion Shamrock Mozambique Zambia Tanzania DRC Ghana Kian Ann & subsidiaries in South East Asia *Equipment sales discontinued. Aftermarket support continues (spare parts) 59

60 Capital Equipment (SA)) Northmec (Agricultural Machinery) New Holland* (Agricultural Machinery) CSE (Earthmoving Machinery) Doosan (Earthmoving Machinery) HPE (Hyundai Earthmoving) Criterion (Forklifts) ESP (Parts) 138 dedicated outlets *Equipment sales discontinued. Aftermarket support continues (spare parts) 60

61 Capital Equipment (Kian Ann Group) Kian Ann Engineering One of the world's largest independent distributors of heavy machinery and diesel engine parts HQ in Singapore Subsidiaries in Singapore, Indonesia, China, Canada, United Kingdom, USA and Myanmar Joint venture in India Associate in China Kian Chue Hwa Industries One of Asia s largest independent distributors of commercial and industrial vehicle parts HQ in Singapore Subsidiaries in Indonesia, Thailand and Malaysia Associate in Myanmar 61

62 Engineering Engineering Solutions Solutions BMG (Bearing Man Group) o o o o o Engineering components & technical services 102 branches Bearings, Seals, PT, Tools, Fasteners Drives, Motors, Belting, Field Services Filtration, Hydraulics, Lubrication, Pneumatics Hansen Man-Dirk Group (incl SA Tool) o o Autobax o o OST Hyflo Tools & equipment 20 branches & subsidiaries Automotive 3 branch network 62

63 Group profit drivers Mining and industrial activity (ESG) Agricultural activity (Northmec and aftermarket parts) Construction and earthmoving activity (CSE, Doosan SA & HPE) Warehousing (Criterion Equipment) Global replacement spares market (Kian Ann) 63

64 Executive Management Team BOARD OF DIRECTORS Dr Christo Wiese (Non-Executive Chairman) ENTITY CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER Invicta Holdings ARNOLD GOLDSTONE CRAIG BARNARD Capital Equipment Group TONY SINCLAIR GEOFF BALSHAW Engineering Solutions Group GAVIN PELSER BENNIE GROENEWALD 64

65 Shareholding as at 31 March % Samuels Family Goldstone Family Sherrell Family 7% 4% 1% Exec Directors 1% Treasury Directors Total % 53% Public % 47% 47% 38% Wiese Family Public 65